RPT-Groupon tumult turns up the pressure on Mason

SAN FRANCISCO, Aug 14 (Reuters) - Groupon Inc's latest financial results raise new questions about the dailydeals company's business model and whether Chief ExecutiveAndrew Mason is the right person to fix it.

The company missed second-quarter revenue expectations onMonday for the second time in three quarters as a publiccompany.

Now, analysts say investors' patience is wearing thin asMason strives to turn around the company's internationalbusiness and sustain North American growth. The 31-year-oldmusic graduate has often drawn criticism for his quirky anticsin Groupon's early days, from downing a beer during staffmeetings to insisting on employing unusual accounting methods.

"Investors may be beginning to question managementcredibility," Scott Devitt, an analyst at Morgan Stanley, said.

Groupon's shares slumped 27 percent to a record closing lowon Tuesday and are down more than 70 percent since the companywent public in November at $20.

The sell-off caps months of tumult for investors that haveincluded an accounting investigation in the middle of itsinitial public offering.

"This management team doesn't yet have an execution trackrecord," Citi Research analyst Mark Mahaney said on Tuesday. "Inthe meantime, the core Daily Deal business is sharply slowing."

Several shareholders declined to comment on Tuesday. But thecompany is at a pivotal stage as it reshuffles management andexpands into new areas to offset a dwindling daily dealsbusiness. One past Groupon backer said that switching helmsmenwould be counter-productive.

Groupon grew rapidly as a private company by offering bigdaily discounts on local services, such as restaurants, tomillions of online subscribers. That business is slowing andrivals from Google Inc to Amazon.com Inc aregetting into the market.

Mason's plan involves expanding into new areas such asconsumer product sales, and becoming what he calls the"operating system" for local commerce.

Potential returns on the investments needed to build thislocal commerce platform will not be known for some time, Mahaneysaid.

A Groupon spokesman and a spokesman for the company's boarddeclined to comment. Major shareholders and individual directorsof the company also declined to comment or did not respond tophone messages and emails seeking comment.

INGENUE?

With little previous experience running companies, Masonoversees a business with more than 10,000 employees andoperations in 48 countries.

He has tried to avoid conforming to Wall Street's typicalview of a CEO, but his quirky approach may have exacerbatedconcerns, according to some analysts.

While Groupon was still a private company, Mason wasphotographed with cats on his head and the CEO reportedlybrought a pony to the company's Chicago headquarters ahead of ameeting with New York City Mayor Mike Bloomberg.

During the lead-up to Groupon's troubled IPO, Mason wrote arallying memo to employees that disclosed new financial details,catching the eye of regulators.

In April, Mason told employees in a webcast town-hallmeeting that Groupon needed to grow up.

"He is young, has never run a company before, has beeneccentric and has not inspired any confidence," said SameetSinha, and analyst at B. Riley & Co. "I would think shareholdergrumbling is increasing."

During the second quarter, the European business suffered asthe weak economy sapped demand for higher priced daily deals.

Mason told analysts on Monday that Groupon plans to reviveits European business by rolling out technology that has alreadyhelped make its North American daily deals more relevant toconsumers. Groupon is also planning to cut the size of discountsoffered to consumers in Europe and make its deals more favorableto merchants in the region.

TOO HOT TO HANDLE

One partner at a venture capital firm who at one pointinvested in Groupon said now may not be the time to bring in anew CEO.

As a co-founder who retains a large stake in the company,Mason has the passion to fight for the business during toughtimes like these, the person said. The person was not authorizedto speak publicly about Groupon.

Sinha said Groupon may have simply grown too large for Masonto handle - which is why he's seeking expert assistance.

Several key executives have been hired to buffer upGroupon's upper echelons abroad, and analysts say the Street iswaiting to see if those hirings bear out.

Among several key changes across the world, Groupon tappedKal Raman, a former executive at Amazon.com, to run operationsin 10 countries. This month, he was promoted to head ofworldwide sales and operations.

"He had a good idea - daily deals - and put that in motion,"Sinha said. "What he is trying to implement worldwide is agargantuan undertaking and fraught with risk."